Estonia ready for membership in eurozone

Published 12:00 am, Saturday, January 1, 2011

Associated Press

TALLINN, Estonia -- Estonia kicked off historic New Year's festivities Friday night as the tiny Baltic state began the countdown to a midnight changeover to the euro, Europe's embattled common currency.

The inclusion of Estonia, a minuscule $19 billion economy, in the $12.5 trillion euro area is being touted for its symbolic importance after the currency was battered throughout 2010 by bad news. Two members -- Greece and Ireland -- required international bailout funds to avert bankruptcy.

Though Estonia will become the 17th member in the euro area, it could be the last new entrant for several years as all other potential newcomers from Eastern Europe either shy away from adopting an unpopular currency or fail to meet criteria on budget deficits and inflation.

European Commission President Jose Manuel Barroso welcomed Estonia to the eurozone Friday, saying the currency switch would boost the nation's economy and send a powerful message to all EU members.

"It is a strong signal of the attraction and stability that the euro brings to member states of the European Union," Barroso said in Brussels.

Leaders of Germany and France, the eurozone's powerhouses, also made audacious New Year's statements in support of the common currency after the worst year in its 12-year history.

"My dear compatriots, don't believe those who propose that we get out of the euro," French President Nicolas Sarkozy said in a televised address to his nation. "The isolation of France would be madness. The end of the euro would be the end of Europe."

In her appeal to Germany on Thursday, Chancellor Angela Merkel called for strengthening the euro, which is now the main currency for 330 million Europeans.

"This is not just about our money -- the euro is far more than a currency," she said. "The euro is the basis of our prosperity."

Estonia's decision to adopt the currency is the final step in a dogged, two decade-long effort to integrate its economy with Europe after it achieved independence in 1991. It is the first former Soviet republic to join the single currency club.

Estonia's leaders and many economists believe the country's economy, which contracted a staggering 14 percent in 2009, will benefit with the euro, though the country still has painful structural reforms to implement before reaching western European living standards.

Estonia will be the poorest member of the eurozone, a cause for concern for many Estonians who fear they will have to cough up scarce resources to help other member countries that failed to maintain fiscal discipline.

But Ansip reminded Estonians that the eurozone isn't a one-way street. "We cannot talk about solidarity just when Estonia needs help," he said. "We have to help others, too."

He also downplayed the past tumultuous year for the euro. "I don't think it's a Europe crisis we have right now. There is crisis in some eurozone member states," Ansip told Associated Press Television News.

Celebrations will include open-air concerts in subzero weather and for foreign dignitaries a gala concert in the national opera house featuring the music of U.S. composer George Gershwin.

The Finance Ministry said banks and IT-systems were prepared to cope with the changeover as hundreds of ATM-machines were being loaded with euro notes.

Selected bank branches and post offices were scheduled to stay open over the weekend to accommodate the switch, but police urged citizens not to rush about with large amounts of cash due to robbery risks.

After Slovenia and Slovakia, Estonia will be the third East European country using the euro. Seven other countries in the region -- Poland, Romania, Hungary, Czech Republic, Bulgaria, Lithuania and Latvia -- also are required to phase in the euro as part of European Union membership, though there is no deadline to do so.

Latvia and Lithuania, Estonia's Baltic neighbors, are enthusiastic supporters of the euro and could become the club's newest members in 2014.